Once again, NYT paints a foolish picture of banking crisis
If many of those troubled assets can be removed from bank balance sheets, and others seem to have a clear market value, economists hope that banks would feel freer to lend -- rather than continuing to hoard capital to protect themselves from further losses. Only then, the experts say, can the banking system get the economy moving again. -- NYTI added the bold. Once again (my previous blog on this topic), this is a misconception from the NYT. If Geithner et al ARE indeed thinking this way, they are dead wrong. Banks won't lend on FUNDAMENTAL reasons, not liquidity problems alone. I know for a fact that if you've got good credit and some collateral, money is pretty easy at the consumer level. Given that the Fed has liquified the corporate paper market beyond belief (and largely in secret), the whole premise stinks.
This is just a lame excuse to socialize losses via a complicated insurance scheme worthy of the CDS schemes which apparently felled AIG and others. While Geithner et al may have learned from those problems, it's not evident and the NYT spin is very disheartening to me. Why should we think this isn't a worse deal for the taxpayer than what Paulson offered in Sept/Oct?
No taxpayer money to gamblers or crooks! If Geithner has nothing useful to say in response, toss him out, and try someone else. Obama clearly indicated he'd be willing to shift tactics as needed.
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Bravo! How do I "recommend" this post? It is completely accurate!
Seems the MSM is at it again -- parroting what the gov says without any questioning or reasoning or thought.
February 9, 2009 11:33 AM | Reply | Permalink
Thanks! Did you find the 'recommend' link at the very bottom of the post:
PERMALINK | COMMENTS (1) | RECOMMEND RECOMMEND (4)
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I'm not sure that article is parroting a government line, it may be that it is parroting someone else's talking point.
February 9, 2009 2:39 PM | Reply | Permalink
I'm actually surprised by how ineffectual the fed is. They're going to have to increase their balance sheet x25 if they're trying to keep credit flowing the way it was. That ain't happening. all their doing is softening the fall a bit. I wouldn't get all crooks and liars on them...
February 9, 2009 7:34 PM | Reply | Permalink
The Fed has lent out well over $1T in the past year. I don't know what their balance sheet looks like, how do you figure 25x?
February 9, 2009 9:04 PM | Reply | Permalink
You're absolutely right that the banks, as they judge the fundamentals right now, are being very careful with their consumer and mortgage lending. And here's a problem -- when we say "get the banks lending again" we can't mean "at the same standards they were lending 5 years ago," unless we want all of them to go out of business.
They are lending to each other, which they weren't doing a few months ago. The TED spread is still high but it's way down. That normalcy is returning.
But they're holding back on loans to consumers, home buyers and investors and... they're not going to lend at those levels again for a generation.
February 9, 2009 9:25 PM | Reply | Permalink
For a generation? I hope never!
Homeowners took $9T out of home equity in the decade ending with 2006, to spend on whatever they wanted. That's more than 2x the entire Recovery Bill per year! Credit cards got over-used, too; I have no clue how those figures have run. Is there a site with good data on that?
The country is highly "over lended". It will need to grow, or hold its own, not by taking on more debt, but, as far as debt goes, by using less debt more wisely.
What concerns me are two things: This strange spin that the NYT and others are putting out, and the possibility that Geithner is as clueless or incompetent as Paulson.
February 10, 2009 12:19 AM | Reply | Permalink